Franco’s Spain: Autarky and the 1959 Stabilization Plan
Franco’s Dictatorship and Autarky in Spain
Between 1939 and 1975, following the conclusion of the Civil War, Spain experienced one of the longest dictatorships in Europe, ending only with the natural death of the dictator, Francisco Franco. Autarky was the economic system of post-Spanish Civil War Spain, which took place between 1939 and 1959. Ideologically, it was a mixture of totalitarian nationalism and a totalitarian vision of Catholicism, known as National-Catholicism.
Economic Stages of Autarky
Regarding economic issues, autarky experienced the following stages:
- 1941-1945: A period of de-industrialization due to the destruction of factories during the Civil War and Spain’s indirect involvement in WWII.
- 1946-1950: This period coincides with the end of World War II. There is slight economic growth due to the recovery of resources destroyed in the Civil War. At this time, Spain was denied entry to the UN for not having a democratic regime, resulting in international isolation.
- 1951-1955: Since 1949, the world had been divided into capitalist and communist blocs, marking the start of the Cold War. The US began to aid Spain in 1950. The regime was accepted with the help of the Vatican and entered the UN. Thanks to this, economic growth reached 6.6% due to the changing Western world’s attitude toward the Franco regime, the restructuring of economic growth, the inflow of foreign capital, and tourism.
- 1956-1960: In this period, growth reached 7.1%. Industry became isolated from the agricultural cycle, the rural exodus was lifted, and the population modernized.
During the 1940s, Spain was closed to international trade, which led to a surge in food prices due to scarcity. To address this, the government set fixed prices for each product and launched a food delivery system through ration cards. Also, until 1959, a state permit was required to trade with foreign countries. These permits were often granted to friends of the regime, leading to the impoverishment of many and the enrichment of a few.
This isolation from the international context was unsustainable because Spain was a poor country that needed foreign goods. Its economy remained behind, forming a closed and controlled model. In 1952, ration cards were discontinued as the population had more resources and, therefore, higher demand. However, without a corresponding increase in production, an inflationary process occurred, resulting in the need for a Stabilization Plan.
The 1959 Stabilization Plan in Spain
The government had to correct the problem of inflation. Between 1957 and 1958, several steps were taken:
- Monetary Policy: Interest rates were raised to reduce the amount of money in circulation.
- Limits were set on the rediscount rate that generated inflation, which had a lot of liquidity.
- A tax reform was attempted.
- The so-called pledged debt was eliminated.
- The peseta was devalued to 42 pesetas per dollar to facilitate imports and exports.
Despite these changes, the Spanish balance of payments remained negative. Spain had two major problems: inflation and economic imbalance. Therefore, in July 1959, the Stabilization Plan was launched to lay the groundwork for a balanced economy and take advantage of the favorable context of the European economy. The goal was to move from an autarkic economy to an open and integrated one. Some of the measures included increasing taxes and raising indirect transport tariffs.
At this time, Spain finally joined the OECD, the International Monetary Fund (IMF), and the World Bank. It also began to liberalize its imports, but the rest remained under government control. On the other hand, it opened to investment and welcomed foreign capital.
Effects of the Stabilization Plan
Positive Effects:
- Inflation control
- Reduction of speculative credit
- Equilibrium of the balance of payments, which became positive
- Stabilization of the peseta
Negative Effects:
- Recession of the Spanish economy
- Fear of business investment, causing a decrease in investment
- Shrinking demand, leading to unemployment, although many unemployed people emigrated
During this period, tourism began to develop, and foreign exchange started to arrive, laying the foundation for long-term economic growth in Spain. Between 1960 and 1975, Spain experienced a period of economic growth during which GDP grew an average of 6.2% per year.
Factors of Economic Growth (1960-1975)
The factors contributing to this growth were: cheap oil, raw materials, and food; cash flow from tourism and emigrants; foreign technology; and an abundance of labor. The sectors that drove this growth were consumer durables (household appliances and automobiles), the chemical industry, tourism, and construction.